Coffee spent the bulk of the day under structure and macro induced pressure, and most had resigned themselves to more chart damage as KC posted fresh outside day low. However, late day coffee & sugar buying showed up in an extreme instance of bot on bot violence, sending prices soaring towards positive territory for an eventual settlement of 116.65, +.35. The velocity of the move, paired with little popup selling into the late rally, suggested a lack of motivation on the part of discretionary players to fade relative strength. For as little apparent human action as there was in futures, options suffered even more with paper interest in the U 200 C approaching 1000x the only real trade of note. Z/H closed -4.30, 60 points wider 2 dance ahead of FND. London closed before the KC/SB spike, thus missing out on a sympathy bounce, and fell $14 on the day to 1632 in choppy trading. The BMF is closed tomorrow for coffee, though the spot FX market will trade.

Coffee struggled to start the week, settling -350 points at 114.00. Prices gapped lower off the opening leaving a 117.40 – 117.20 hole to plug in the future. Macro selling was evident for much of the US trading day, and the DXY was a weight for much of that session. Sugar traded a remarkably similar path, even as the BRL posted a more volatile / less coherent trading day, suggesting a sell softs program may have been in effect. Spreads action was heavy as one would expect midway through the index roll. Z/H bowed to pressure into the close, trading the day’s weakest bid/ask throughout the settlement window after concerted selling wore out the buyers minutes in advance. London fell $31 to settle 1654 basis Jan, outperforming KC intraday for much of session. MOC selling knocked out roughly ½ cent of premium as the curtains fell on London.

Bloomberg Need to Know The U.S.-China trade war may be coming to a ceasefire. President Donald Trump wants to reach an agreement with Xi Jinping at the G-20 summit in Argentina later this month and asked key U.S. officials to begin drafting potential terms, said people familiar. The push for a deal was prompted by a phone conversation with the Chinese leader that Trump described as "long and very good."Global markets rallied on signs of a thaw in the trade war. Benchmarks in China and Hong Kong jumped more than 2%, while S&P 500 futures reversed losses and Nasdaq contracts wiped out steep Apple-inspired losses. Copper led gains for industrial metals. The Aussie surged, the yen fell and EM currencies rose. A slide in Treasuries sent the 10-year yield up to 3.17%. Brent halted losses near $73 a barrel. Gold slipped.

How Will Brazil’s New Administration Impact the Coffee Sector?CoffeeNetwork (New York)

CoffeeNetwork has gathered the input and insight from Vitor Andrioli, Fábio Rezende and Ana Luiza Lodi with INTL FCStone in Brazil to help break down the potential impact the incoming President and his administration could have on the coffee sector.

On Sunday, October 28th, Jair Bolsonaro was elected Brazil’s next President with 55% of the vote. He will take office on January 1st

Domestic Diesel PricesOne of the challenges Bolsonaro and his government will be faced with is what to do about the ongoing subsidy on domestic diesel prices. The subsidy was the result of a 10-day trucker’s strike in May, which resulted in financial losses for the coffee industry of around $150 million and a decline in coffee exports of 400,000 to 500,000 bags during the month. This subsidy is set to expire on December 31st.

“Bolsonaro hasn’t said anything officially yet as to whether he will keep the subsidy or not,” said Rezende, “but I think it will be very hard to keep it.” He explained the subsidy is very expensive, costing the government around 9 billion reis which could mean that another semester of subsidies is most likely off the table right now. “With the Real’s stronger value against the dollar, diesel prices are not as high as they were before, so he may not even have to renew the subsidies,” he said.

According to Andrioli, truckers associations have already come forth and announced that they are not planning another strike, but instead, trying to negotiate with the new President. “During the truckers strike last year, most of them declared that they supported the Bolsonaro government and a return to military dictatorship, which is what he reminds us of,” he said. The truckers and Bolsonaro have established somewhat of a “truce,” and there should be much more cooperation than the truckers had with past President Temer.

If the US dollar weakens and the Brazilian Real is stable, this would probably mean cheaper imported diesel, which would be favorable for truckers. “A weaker dollar would actually help the government avoid the adoption of a new subsidy,” said Rezende. If the Real weakens, the truckers may strike again, and Bolsonaro may have to approve new subsidies. “More likely, with a weaker currency, they will use dollar reserves, which could be used to contain the Real.”

Freight TableAs a result of the May truckers strike, on May 30th, the government published a reference table of minimum freight prices (per kilometer and dependent on distance and cargo type) which was met with much disapproval as many agricultural producers saw higher expenses. It also attempted to force clients to pay for the return route of a truck once it has emptied its cargo. On June 7th, the government published a revised table to try and appease the unhappy farmers. The attempt, however, was unsuccessful, and truckers threatened to strike yet again. The second table was taken down after only four hours, leaving a new policy on freight prices in the hands of the supreme court. Many exporters in Brazil began holding back supplies to avoid unexpected expenses. Technically, the initial table issued on May 30th is still in effect.

Bolsonaro has not announced any decision on the freight table and whether he will renew it or not. “This is a major uncertainty in the agricultural sector of Brazil,” said Andrioli. “It is unlikely that we will see an agreement between the ag sector and the transportation companies in the coming months,” he said, “not until 2019 will discussions begin to take place. Right now is not the right environment for these discussions.”

“Producers don’t like the table and many don’t follow it,” said Lodi, explaining that some producers do get fined for not following the table. “The law indicates that a new table should be in place by January,” she said, but that remains to be seen.

Brazilian RealSince mid-September, the Brazilian currency has surged more than 15% against the US dollar. Much of the strength of the currency has come from the expectation of Bolsonaro’s election. “The market is optimistic with the new government, “explained Andrioli. It is expected that he will pass fiscal adjustment reforms, which were the major force in driving down the BRL in the past year or so.

But, a reversal of the country’s currency should not be ruled out. When a new President takes office, at first, they have an easier time with congress, their support is still strong and their approval rating is normally high, however, if promises aren’t kept or progress isn’t made, we could see a devaluation of the Real.

“What we are seeing right now is that Bolsonaro will probably have a majority in the Chamber of Deputies but the senate is much more divided (among 21 parties), so he will have a harder time to assemble a majority,” Andrioli told CoffeeNetwork. “If it takes a long time, he could wind up postponing the fiscal adjustment reforms that are considered urgent right now.” Should this happen, confidence in the new President could be negatively impacted.

Additionally, considering the international scenario, the situations of both emerging markets and commodities are also bearish for Brazil’s currency.

Farmers OpinionOverall, the new government has the support of the agricultural sector, it seems. In Brazil’s Congress, 40% of the Chamber of Deputies are “ruralists,” or farmers and big land owners, all of whom support Bolsonaro. The agricultural sector has been pleased with the election of Bolsonaro for the following reasons:

1. He is planning to extinguish the environmental ministry and combine it with agriculture ministry, which would move towards supporting deforestation and expansion of planted area.

2. He is against the “landless workers movement”- groups that invade large, rural properties that are unproductive and colonize those properties. Bolsonaro has said that he will consider this an act of terrorism. Farmers are in favor of this harder approach.

3. He has declared that he will reverse some of the indigenous reserves, or at least halt approval of new indigenous reserves, which will free up more land for farmers.

While these three main positions have gained Bolsonaro approval amongst the agricultural sector, none of these new policies should impact coffee growing in Brazil. Coffee is grown in what is called a “traditional” area, areas that are already cultivated; and expansion, hostile colonization or indigenous land is not found in Brazil’s coffee producing regions.

What could have a major impact on coffee, however, is Bolsonaro’s decision whether to pull out of the Paris Agreement or not. He has flip flopped his stance on the matter thus far, initially saying Brazil would pull out and recently changing his mind.

“If Brazil does wind up pulling out of the Paris Agreement, then maybe Brazil would have non-tariffed barriers for coffee exports,” says Andrioli. He explained to CoffeeNetwork that all the trade agreements between the European Union with Canada, Japan and Vietnam have a chapter specific to the discussion of environmental issues and climate change. “If Brazil pulls out, then maybe some of the coffee importers in Europe could reduce the volume of coffee they import from Brazil, or halt imports altogether. This could be detrimental,” he said.

Longer Term OutlookCOFFEE: The December Coffee staged a major bottoming turn, lifting the primary retracement to an expected target at 12500. The back off in late October is likely reflective of a short term shift to corrections or consolidation of the October gains. We may see trade move into a multi-month sideways congestion with short term swings between the low 120’s and 10570 retracement support basis lead contract. Only a close under 10570-10500 damages the bottoming signals. Likely a multi-month period of congestion that holds or levels off over 10900-10600 will build a base to attempt another bull advance looking out into 2019. After a congestion base build up, a breakout beyond 12500+ should launch advances to 13500+/- and 14390-14445 looking out into 2019.

Jan Robusta CoffeeResist: 1727, 1740-1742ST Trend SidewaysSupport: 1696, 1682, 1673Comment: Yesterdays surge higher has the chart about neutral, resistance still remains at 1727 and 1742 and support will start at 1696.

Coffee Market Report02 Nov 2018The International Coffee Organisation ICO have reported that the global coffee exports for the month of September were 7.8% higher than the same month last year, at a total of 9.43 million bags. This they report, has contributed to the global coffee exports for the just October 2017 to September 2018 coffee year to be 2% higher than the previous coffee year, at a total of 121.88 million bags.These exports over the past coffee year are made up from a 62.9/37.1 ration of arabica and robusta coffees, with the prevailing consumer market stocks of arabica coffees remaining relatively high. A factor along with rising coffee supply for this new 2018/2019 coffee year, that fuels the bearish sentiment within the market.The National Coffee Institute in Honduras IHCAFE have reported that the countries coffee exports for the month of October were 91% higher than the same month last year, at a total of 99,509 bags. Most of these coffees they say were related to carryover stocks from the past crop, but with the new harvest having started and many new maturing coffee trees coming into production, that they foresee that coffee exports for this new October 2018 to September 2019 coffee year shall increase by 13% to approximately 8.15 million bags.The National Coffee Institute in Costa Rica ICAFE have reported that the countries coffee exports for the month of October were 53% higher than the same month last year, at a total of 21,830 bags. This rise they appropriate to sellers of presumably mostly past crop stocks, chasing the prices that came with the recovery of the reference prices of the New York market.The Brazil Trade Ministry have come to the fore with their preliminary coffee export figure for the month of October, which they say were 631,50219.28% bags or 19.28% higher than the same month last year, at a total of 3,275,443 bags. One might presume that with a significantly larger new conilon robusta coffee crop this year, that much of this increase might be related to the export of these coffees which last year, were mostly absorbed by the domestic market demand.Meanwhile most of the main coffee districts in Brazil have reported above average rains for the month of October, which has contributed to good flowerings and cherry set. But while it is too early to really talk numbers for the next 2019 Brazil coffee crop, there are some who say that so long as weather conditions remain normal and with regular rains for the next five to six months, that the next year’s crop might be close to a surplus supply 60 million bags. A bearish factor if this proves to be correct, for the medium to longer term coffee market.Today is the Dia de Finados (All Souls’ Day) public holiday in Brazil and coming to the fore as a long weekend, which most likely already started to take some players of the field of play yesterday afternoon and shall most likely keep most internal market players out of the market for the day. Thus, removing some of the negative effects of price fixation hedge selling from the international coffee markets, following what is reported to have already been a slow selling week on the part of the countries farmers.The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 40.14 usc/Lb., while this equates to 34.07% price discount for the London Robusta coffee market.The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 3,865 bags yesterday; to register these stocks at 2,444,217 bags. There were meanwhile a larger in number 4,075 bags increase in the number of bags pending grading for this exchange; to register these pending grading stocks at 31,585 bags.The commodity markets encountered a softer U.S. dollar yesterday, which assisted most markets to have a day of buoyancy, to see the overall macro commodity index taking an upside track for the day. The Cocoa, Coffee, Cotton, Copper, Orange Juice, Wheat, Corn, Soybean, Gold and Silver markets ended the day on a positive note and the Sugar market was steady for the day, while the Oil and Natural Gas markets ended the day on a softer note. The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 1.5% higher; to see this index registered at 415.26. The day starts with the U.S. Dollar marginally softer and trading at 1.300 to Sterling, at 1.142 to the Euro and with the dollar buying 3.697 Brazilian Real, while North Sea Oil is tending softer and is selling at US$ 71.55 per barrel.The London and New York markets started the day yesterday on a modestly positive note and with both markets maintaining this stance, into the early afternoon trade. As the afternoon progressed the New York market and with some emotional support from the softening dollar and the positive nature of the overall macro commodity index attracted speculative support and followed by the London market, with buy stops being triggered to set both markets on an upside track for the day.The London market ended the day on a very positive note and with 86% of the earlier gains of the day intact, while the New York market likewise ended the day on a very positive note, with 96.2% of the earlier gains of the day intact. This close and with Brazil off the field of play for the day, might well inspire some degree of confidence, but the recovery does not come with any supportive fundamental news and one might guess the markets might only be due for a cautious steady start for early trade today.Starbucks tops record revenue as coffee drinkers spend more in cafes, shares soarA new flat plastic lid that does not need a straw is shown on a cup of Starbucks iced tea in Sausalito, California. Starbucks finally broke out of its slump in the U.S. thanks to customers spending more on frappuccinos, tea and snacks during its most recent quarter.The coffee company's shares soared more than 9 percent in evening trading Thursday after the company reported better-than-expected earnings that beat Wall Street's estimates on revenue, profit and same-store sales.In the U.S. and Americas, sales at stores open for at least a year grew 4 percent during Starbucks' fiscal fourth quarter, beating analysts' forecast of 2.7 percent. It was the company's strongest same-store sales growth in the U.S. in five quarters, Kevin Johnson, CEO of Starbucks said during an earnings call Thursday.That helped drive Starbucks' revenue to a fresh record of $6.3 billion, up 10.6 percent from $5.7 billion during the same time last year.Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Adjusted earnings per share: 62 cents vs. 60 cents

Revenue: $6.3 billion vs. $6.27 billion

Global same-store sales: 3 percent vs. 2.3 percent

"Starbucks' record Q4 performance reflected meaningful improvement in virtually every critical operating metric compared to Q3," Johnson said in a statement Thursday.For about two years, Starbucks has been in a funk. While the company's same-store sales have been positive, investors have been looking for faster growth.In the fourth quarter, the company posted better-than-expected same-store sales across all four of its major markets. Global same-store sales during the fiscal fourth quarter rose 3 percent, up from the 2.3 percent analysts had expected according to Refinitiv.Neil Saunders, managing director of GlobalData retail, said consumers had more to spend on treats and indulgences during the 13-week period ended Sept. 30 ,and remodeled Starbucks stores enticed diners to stick around longer and buy more food and coffee."The final piece of the jigsaw comes from pushing the afternoon daypart much harder, primarily from loyalty-based discounts and offers," Saunders said. "We believe this has stimulated more purchasing, especially from larger groups wanting to take advantage of the 'happy hour' deals."In the quarter, Starbucks continued to focus on its cold beverage platform, which includes cold brew, nitro cold brew, refreshers and cold foam, as customers have been craving more iced drinks than hot ones.It also moved a number of "remedial tasks" that baristas were doing during the day to be done during closing so that they would have more time to work with customers, Brewer told CNBC.Beverage sales "contributed 3 of the 4 points of comp growth, the strong efforts performance of fiscal year 2018 and given it's our highest margin category, we're encouraged by this shift in [comparable store sales] growth," Roz Brewer, chief operating officer at Starbucks, said during an earnings conference call Thursday."You'll continue to hear us talk about beverage innovation because that's where we see our greatest push from transaction growth," she said.The company's net income fell 4.1 percent to $755.8 million, or 56 cents a share, during the 13-week fiscal fourth quarter ended Sept. 30, compared with $788.5 million, or 54 cents a share, during the same period last year.After adjusting for some one-time items, the company earned 62 cents a share while analysts expected 60 cents a share, according to average estimates compiled by Refinitiv.Starbucks said its loyalty program, which accounts for 14 percent of all its transactions, now has 15.3 million members, a 15 percent jump from last year. Starbucks Rewards members drove nearly 40 percent of sales in the U.S., the company said.The company is also building an email list and sending promotions to non-rewards members. In the fourth quarter, Starbucks grew the number of registered customers to 10 million, up from 6 million in the third quarter."We are just getting to know them, engage them with happy hour deals," Brewer said. "We hope to convert them into rewards members."During the quarter, the company open 604 net new stores and now operates more than 29,000 stores in 78 markets.The company returned $3.6 billion to shareholders through a combination of dividends and share repurchases.Also on Thursday, Starbucks announced its 2019 outlook. Here's what Starbucks expects:

To add around 2,100 net new Starbucks stores globally

Same-store sales growth near the lower end of its current 3 to 5 percent range

Consolidated revenue growth of 5 to 7 percent

Adjusted earnings per share in the range of $2.61 to $2.66

World Coffee Exports Increased 7.8% y/y in September: ICOExports rose to 9.43m bags vs 8.75m bags a year earlier, the International Coffee Organization says on its website.

Exports for the full 2017-18 season rose 2% to 121.9m bags

Arabica exports +6.7% during Sept, 6.109 mln bags and for the year +0.8% to 76.66m bags

Elections came out as expected with Bolsonaro has been declared President. It has brought relief to the market and a good sensation that after storm we could hope for some bonanza.

Currency opened up very strong at 3,58 reflecting optimism, but after euphoria faded away reality weighted and it has stabilized at circa 3,70. After all, Bolsonarohas a lot to prove from January onwards and we believe until there will be volatility. However positive news regarding of nomination of very capable people around him.

NY gave back a big portion of the rally. From the high of 125,50 it has lost 14 cents. Producers backed off slightly however still good volume available.

We have adjusted our 18/19 crop to 60.8 Mio from 59.5, being 44.8 Arabica and 16 Conillon.

Weather has been very good for 19/20 crop. We expect a record Conillon crop and for Arabica it is still early days to have a reliable conclusion. We believe it will be lower due to off-cycle but how lower only by December we could get a better view.

Coffee prices came under pressure with KCZ settling down 185 points at 112.40, as commodity markets took it on the chin, courtesy of the dollar index trading to the brink of 14 month highs. All commodities in the BCOM index save lean hogs and silver were down on the day as sensitivity to interest rates hikes supports the dollar whilst bearing down on the commodity complex. Arabica, true to form, traded more specifically correlated to the BRL as the FX market remains jittery on uncertainty surrounding President-elect Bolsonaro’s intended economic reforms. Open interest increased by 2,511 lots on yesterday’s 540 point sell off in what was likely a mix of new shorts and long liquidation with the bias to the former. Robusta faded $11 settling at 1676 and formed a double bottom at 1669, the high of the 1665-1669 October 5-8th gap.

A dreadfully boring day went out under duress, the victim of predatory selling and Brazil hedging ahead of the nation’s election this weekend. Arabica closed 119.75, -1.40, taking out yesterday’s low by a single tick (119.25) during the settlement period, allowing for an outside day before snapping back higher, trading around 120 into the end of the day. This caps off a questionable performance on the week, as KC traded its first lower high, lower low on the weekly chart after 4 consecutive weeks of pure ascent. While the market favored candidate Jair Bolsonaro seems all but assured to take the helm of the Brazilian government, a growing chorus of traders wonder if his victory has been priced in, leaving room for weakness in both the BRL and coffee come next week. Robusta closed up $23 at 1720, even after it too was the recipient of end of day selling. Nov notices clocked in at 3047 lots. Managed Money pared bets on all sides of the London market with longs liquidating 987 lots, shorts covering 5388, and spreads falling 1859. Commercial positions also fell dramatically as heavy switch positions drew down into notices.

COT net non-commercial position came in well below expectations (-51,983).

Arabica, 121.10, +3.45, shook off global risk concerns to claw back all but a penny of yesterday’s selloff. Prices were supported early by value buying, yet volumes were muted even as the clock crossed the 8am NY hour. Modest Brazil selling kept ambitions in check, but the thin trading conditions ultimately gave way to a chunky allocation at 11:20. Our expectation is that this was an infusion of CTA buying triggered in the last couple days. Sensing an opportunity, motivated trade specs threw fuel on the fire pushing the intraday high to its peak minutes later. Interestingly KC ignored BRL weakness for much of the day even as KC prices remain above the multiyear median line in local terms. Spot spreads finally tightened in as far at -3.65 as the short roll presumably began, yet end of day weakness in ZH (-3.75 settlement) once again confounded the trade. London was unable to keep pace on the day, settling down $2 at 1719 on the day as X/F continues weak at -26.

The Arabica market (122.05 -50), posted a new high for the move adding to a string of 8 higher highs and lows over the past 9 days. Prices opened up unchanged and rallied to the high of 124.30 at 6:53 a.m. and by 7:40 the low of 120.80 was posted, before most U.S. traders had even manned their ships. Moving averages have been crossing positively almost on a daily basis. On October 9th the 26/40 day crossed, on the 10th the 10/100 day moving averages crossed, the 11th the 20/60 crossed, the 12th the 26 crossed the 50, and today, the 40 day crossed over the 50 day moving average. As the Brazilian real has rallied 13% off of 3 year lows, sugar has rallied 29% off of 11 year lows, and KC to date has seen a 30% advance since its 12 year low of was posted. The biggest intraday pullback since the 95.10 low of September 18th was yesterday’s 255 point dip as the technical breakout continues to engage system and momentum funds as buyers. Robusta scored a new high for the move plus $16 on the day only to retreat and settle at 1775 plus $1 MT.

Arabica, which opened on the low’s yesterday, started today out on a new highs for the move and following 3 days of gains, settled lower at 117.65 down 170 points. The Dec contract filled the 116.80-116.90 gap from yesterday’s opening while the low in March was 10 points above yesterday’s. For those who mind gaps the one from yesterday between 120.40-120.50 along with the 112.80-113.70 (Oct 5-8) and 98.20-98.60 rollover gaps remain open. Intraday price action more or less mimicked that of the BRL which posted a 2 ½ month high ($/R 3.6931) before weakening a tad in subdued transactions and tightest range in 4 weeks. Open interest fell for the 12th day running which has raised caution amongst traders in light of the short covering nature of the buying, and paring down of the extreme record non-commercial short. Robusta traded a similar outside session with a higher high and low settling at 1755 plus $3 MT.

The twin impacts of 200DMA resistance and generalized risk off as tariff impacts come into view with corporate earnings conspired against coffee, 111.90, sending it 125 points lower after an admirable European session. An opening gap was closed by mid-morning US time as the BRL opened weaker – itself a victim of global sentiment. Robusta again garnered Vietnam selling even as CTAs buy alongside roasters, pressuring prices in the early hours, though the final print was a modest $6 lower at 1698 basis F9. The futures and structure seem to be mutually exclusive as to which will perform well, and even as outright prices climbed steadily higher for the final 2 hours of the London session, XF closed a tick off its low, settling -16 in a -4/-17 range.

Arabica posted a wild ride, settling 105 points lower at 106.60 just above the Dec based UBB. Prices predictably rallied on system short covering early, shaking off good clips of Brazil hedging. With buy signals flashing, & the BRL accelerating gains on its way from 3.87 to 3.82 over the opening hour, KC was able to rally to 110.80 through a wall of origin selling. However, as the BRL weakened from 10:30am EDT onwards towards 3.90, and correlated markets like sugar, cocoa, and especially robusta slipped into negative territory, spec buying proved unable to keep pace with the flood of origin & trade house profit taking. To cap off a disappointing performance, MOC selling inundated the KC at the end of the day all but assuring the negative close. Robusta, 1588, -16, also fell on the day as spec selling pressured prices lower and roasters were unwilling to accommodate the full brunt of the flow. Most surprising to many was the weakness in XF specifically, as the front month spread fell to a $2 premium. The market dynamics are fluid as the crop approaches, and nearby price action will require continued monitoring.